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  1. #1
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    Apr 2005
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    Default Quantitive Easing, Is Auckland already doing it by default?

    The rest of the world is printing money.
    That reduced value money is then lent to us to buy houses.
    Are we paying interest to overseas banks for worthless paper?
    Is the exchange rate really working cleanly… or is there some technical fudge whereby funny money can be traded as if it were the good stuff?
    Just toying with the idea.….

    Because you only need to fudge the exchange rate a bit in order to swap all the future effort and growth of all New Zealanders for what is in reality worthless paper.

  2. #2
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    Default

    Sure other countries are printing money, but as a result their dollars (or whatever) devalue in comparrison to ours - as one would expect as there are now more (of their dollars) so supply has increased and consequently value has gone down.
    So the intirinsic value remains the same.

    Seems to me that the exchange rate system works just fine in this case.

  3. #3
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    Sep 2007
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    Auckland
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    8,451

    Default

    Well they can use their inflated money to come and buy property here... causing inflation here.
    Squadly dinky do!

  4. #4
    Join Date
    Jul 2011
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    195

    Default

    Sorry can I ask a what maybe a stupid question here......but it’s been bugging me…

    What Japan was recently doing is going around the world, buy lots of assets/investments with their newly printed money. Recently US also have done the same to China.

    So does this artificially push up local economy (at the countries they are buying in)? i.e. more money in the society (even though it's artificially injected).

    Also what is the effect on the exchange rate (at the country they are buying in)? I presume it's pushing it higher as it creates more demand on the local currency..... China's RMB has been going up against greenback like crazy in the past weeks.

    Although recent China's economy data hasn't been as good. But the exchange rate effect is definitely there.

    The other thought is NZ exchange rate is high and economy growth is said to be "well".....is it really though? I really have my doubts...
    Last edited by SleepyTiger; 24-04-2013 at 06:32 PM.

  5. #5
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    Auckland
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    Default

    Quote Originally Posted by SleepyTiger View Post
    What Japan was recently doing is going around the world, buy lots of assets/investments with their newly printed money. Recently US also have done the same to China.

    So does this artificially push up local economy (at the countries they are buying in)? i.e. more money in the society (even though it's artificially injected).

    Also what is the effect on the exchange rate (at the country they are buying in)? I presume it's pushing it higher as it creates more demand on the local currency..... China's RMB has been going up against greenback like crazy in the past weeks.


    The other thought is NZ exchange rate is high and economy growth is said to be "well".....is it really though? I really have my doubts...
    Really is America buying up Chinese assets? Not saying they aren't, but that one strikes me as strange on so many levels.

    But when a country prints money there is more of it so the value of their dollar goes down. Basically it is supply and demand. You increase supply the value goes down.
    You will note the exchange rate between NZ and America for instance. Our dollar has increased markedly - which is another way of saying theirs has gone the other way.
    For Americans to buy assets in NZ now costs them a lot more of their dollars as a result.

    The hope for them is that because their dollar is now cheaper we can afford to and thus will buy more of their products helping their employment situation.
    There are other benefits - and drawbacks for them too. They can't keep doing it forever or it will end in a big pile of poo poo for them.

    But here's one that I haven't resolved yet. Populations tend to increase. If they didn't print some money it would be in short supply and could lead to deflation and choke the economy (as I see it) so what is the "right" amount. I guess what I am saying is that printing some money for a while and when you absolutely need to, as I see it shouldn't be too harmful and could well be seen as an adjustment. But what is the right amount? That's the big question.

    Any time there is increased demand for a currency it is going to go up - so yes if America for example is buying assets in NZ that will push up our dollar. The big shake in Chch, all the insurance money coming in for overseas insurers paying for the rebuild in NZ dollars - this must impact our exchange rate too.

    Re our economy - I would have said it's in a fairly robust state. We didn't do stupid stuff (borrow and spend like crazy or print money) to try and kick start it during the GFC. Half of NZ are getting "richer" by the day thanks to a property boom so are starting to spend again (see new car sales for example) and thanks to Chch many tradies are getting pay rises and making money again and the country didn't even have to earn that money to pay the contractors.
    Check out the share market +24% last year, + 10% this year (so far) and most listed companies are turning in results to match indicating that we are recovering.
    Not saying that we are humming along with no problems, but we aren't doing too bad.
    Last edited by lawt; 24-04-2013 at 07:07 PM.

  6. #6
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    Apr 2005
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    Default

    Quote Originally Posted by lawt View Post
    But here's one that I haven't resolved yet. Populations tend to increase. If they didn't print some money it would be in short supply and could lead to deflation and choke the economy (as I see it) so what is the "right" amount? That's the big question.

    When price inflation equals zero.

    That’s what many great economic minds say anyway.
    Some argue that slight deflation perfectly counteracts typical human short term thinking.



    Inflation is the one form of tax that can be imposed without legislation. Milton Friedman.

    By a continuing process of inflation, government can confiscate, secretly and unobserved,
    an important part of the wealth of their citizens. John Maynard Keynes
    Last edited by McDuck; 25-04-2013 at 08:19 AM.

  7. #7
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    Auckland
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    Default

    Quote Originally Posted by McDuck View Post
    Inflation is the one form of tax that can be imposed without legislation. Milton Friedman.

    By a continuing process of inflation, government can confiscate, secretly and unobserved,
    an important part of the wealth of their citizens. John Maynard Keynes
    This is why we should all thank Rodger Douglas for the reserve bank act - amongst many other great deeds.

    Still, you need to sell the message to a lot of other people - including the greens.

  8. #8
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    Apr 2005
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    Default

    Quote Originally Posted by lawt View Post
    This is why we should all thank Rodger Douglas ....
    I’m not sure what you mean.
    What’s the connection between Rodger Douglas, and Auckland house price inflation possibly being a result of foreign Quantitative Easing?

  9. #9
    Join Date
    Sep 2003
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    High up above and deep down under
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    Comment from Tony Alexander....
    NZ Housing Market
    http://tonyalexander.co.nz/regular-publications/bnz-weekly-overview/housing-market/pollution-in-china-will-push-nz-house-prices-higher/
    The more polluted China gets the more upward pressure there will be on Auckland house prices.
    "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx

  10. #10
    Join Date
    Sep 2004
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    Hastings
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    Default

    Quote Originally Posted by lawt View Post
    But here's one that I haven't resolved yet. Populations tend to increase. If they
    didn't print some money it would be in short supply and could lead to deflation and
    choke the economy (as I see it) so what is the "right" amount. . . . But what is the
    right amount? That's the big question.
    The amount that matches an increase in GDP?
    Want a great looking concrete swimming pool in Hawke's Bay? Designer Pools will do the job for you!


 

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